Steep rise in mortgage fraud just the tip of the iceberg, report indicates

Written by Ray Clancy

Tuesday, 10 August 2010 08:55

Lenders in the UK are face rising mortgage fraud problems with the amount almost quadrupling in the first six months of the year, research shows.

Whilst the number of frauds in the first half of the year, 21, is only marginally up from the 18 cases in the first half of 2009, the value of the cases has hugely gown, a report from KPMG has found. The 21 cases had a total value of £96 million compared with £18 million in the first half of 2009.

The amount has already exceeded the total value of mortgage fraud across the whole of 2009 which was £77 million and the peak has not yet been reached. The incidence of mortgage fraud being uncovered is rising as stagnating house prices and the economic slowdown expose loans that had been obtained through falsified information.

‘The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate,’ said Hitesh Patel, partner at KPMG Forensic.

‘This is a legacy issue for the banks from the pre-recession boom years when house prices inflated, providing the opportunity for fraud. Banks will be hoping that they have uncovered most of their fraudulent loans. But the trend remains upwards and it could be some time before we see the peak,’ he added.

Mortgages accounted for over half of all fraud committed against the financial sector in the period. In total KPMG recorded 166 cases of serious fraud, where the fraud was worth more than £100,000, in the period.

One of the biggest cases this year was a £50 million case that involved two solicitors who were charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty.

Another case involved an estate agent who was jailed for six years after attempting to pull off a £2 million mortgage fraud after stealing the identities of two home owners.

The report also found that professional criminals, often targeting investors, perpetrated the most fraud during the period with 56 cases reported at a value of £391 million. Financial services companies were also widely targeted in 48 cases worth £172 million.